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Ruling
Subject: GIC remission
Question
Are you required to include the amount you received as a remission of general interest charges (GIC) in your 2010-11 assessable income?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
The scheme commenced on:
1 July 2008
Relevant facts and circumstances
You incurred GIC during the 2008-09 and 2009-10 income years from the ATO.
You claimed a deduction in these years for the GIC.
In the 2010-11 income year the legal action was settled and you received a remission of the GIC you incurred.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Section 10-5
Income Tax Assessment Act 1997 Subdivision 20-A
Income Tax Assessment Act 1997 Section 20-20
Income Tax Assessment Act 1997 Section 20-25
Income Tax Assessment Act 1997 Section 20-30
Reasons for decision
Section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision.
Section 10-5 of the ITAA 1997 lists those provisions applicable to section 6-10 of the ITAA 1997 referring to assessable income. Included in that list is recoupment for certain losses and outgoings that are deductible under Subdivision 20-A of the ITAA 1997.
A recoupment is defined in section 20-25 of the ITAA 1997. Subsection 20-25(2A) states that where:
· a taxpayer has incurred expenditure that consists of the GIC under Division 1 of Part IIA of the Taxation Administration Act 1953 (TAA 1953); and
· the Commissioner remits any of that GIC charge,
· the taxpayer is taken to have received that remitted amount as a recoupment of that expenditure.
Subsection 20-20(3) of the ITAA 1997 provides that an amount received by a taxpayer is an assessable recoupment if it is deductible in a current or earlier income year under a provision listed in section 20-30 of the ITAA 1997.
Item 1.3 of the table in subsection 20-30(1) of the ITAA 1997 includes tax related expenses deductible under section 25-5 of the ITAA 1997. Paragraph 25-5(1)(c) of the ITAA 1997 states that expenditure for the GIC under Division 1 of Part IIA of the TAA 1953 is a deductible tax related expense.
Practice Statement Law Administration PSLA 2011/12 states that GIC is a tax deduction in the year that it is incurred. If the GIC is subsequently remitted then the taxpayer is taken to have received the remitted amount as recoupment of that expenditure and that recoupment then becomes assessable (paragraph 13).
In your case you received a remission of GIC in the 2010-11 income year. Therefore under section 6-10 of the ITAA 1997 the remission amount will form part of your assessable income for the 2010-11 income year.